Coming Together: A Grounded Theory Study of the Role of Coaching in the Mergers & Acquisitions Process

CoachHub · 15 September 2022 · 9 min read

Mergers and acquisitions have been considered an important growth strategy for many decades however, few transactions have actually achieved the desired outcome. In fact, nearly one-half of all transactions have failed to succeed (Gerds and  Schewe, 2014; Jemison and Sitkin, 1986). Without effective leadership and guidance mergers and acquisitions can leave a trail of emotional destruction throughout organizations, with years of recovery. If not conducted effectively, they can result in wasted financial resources, high personnel fluctuation and staff and managers suffering from burn-out, fear and frustration (Kotter, 2012).

This study presents the role of coaching during mergers and acquisitions as a vital tool to increase their positive impact and reduce the potential damage described above. The results identified themes relating to leadership, culture and communication as the most vital factors in what makes a successful merger and acquisition. The study also disclosed potential risks and limitations associated with coaching as well as the importance of creating a culture of trust, setting clearly defined metrics, and agreeing on coaching methodologies and contracts from the beginning.

Literature review: 

The study drew data from a series of literatures by experienced merger and acquisition experts. The following are points to consider from the literature review:

  • Ashkenas (2014) argued that mergers and acquisitions were more likely to be successful should they give adequate consideration to the human factors. Economic and organizational factors are important such as strategy, price, and positioning, The impact, however, of the psychological issues tends to be under-appreciated. Ashkenas recommends conducting a diligent identity audit of the acquiree in the pre-merger phase.
  • Fuchs (2001) emphasizes the dangers of not providing adequate support to employees as they are integrated into the new organizational structure. Fuch urges leaders to reinforce strategic perspectives and offer professional coaching during the period of transition as well as the post-acquisition phase of integration.
  • Visagie (2010) highlights the effectiveness of team/group coaching with a focus on mental health. A targeted coaching program supporting managers during a merger and acquisition was shown to improve the well-being of all stakeholders and in turn, positively impact the transition process. 
  • Weber (2015) stresses the importance of bringing all leaders together to develop a clearly defined plan for introducing coaching during a merger and acquisition. The purpose of the coaching, what the coaching hopes to achieve, what success looks like and the competencies of the coach must be clearly communicated for the program to be effective. 
  • Grant (2014) hypothesized that participation in the coaching program would increase goal attainment, enhance solution-focused thinking, strengthen leadership, decrease anxiety and stress, and increase workplace satisfaction.  
  • Clutterbuck (2011) confirms that cross-organization mentoring should happen early on, starting at the public negotiation period. This can have a powerful impact on job commitment on both sides of the organization as it helps to build trust, identify cultural barriers to integration and create informal communication networks.  
  • Bergamim and Braun (2015) explored the question of internal vs. external coaching in and suggests introducing external consultants (coaches) early on and throughout the entire merger and acquisition process.
mergers and acquisitions

The research 

A study of 12 participants was conducted where a widely represented group was interviewed about their experience of a merger and acquisition. Participants came from a variety of industries, such as banking, engineering, technical services, and automotive and held positions in different levels of leadership and departments including General Management, HR, production and engineering. 

The common themes emerging from the interviews were leadership, culture and communication. These three themes were found to be the most pivotal factors of what defines a successful merger and acquisition.

 

Leadership  

The role of leadership in mergers and acquisitions is instrumental to its success. Strong and cooperative leadership drives a smooth transition. Research shows that the common issues leaders faced were as follows:

  • Emotional overwhelm in dealing with the volume of changes 
  • Discrepancies between personal values versus what the organization expects from them 
  • Building trust with the staff 
  • Managing the impact of the merger and acquisition on job commitment
  • Extreme pressure of having to deliver a return on investment in a short period of time
  • Power struggles and changes at the leadership level
  • Leaders finding excuses for not working together, even if both sides agreeing to collaborate

One participant described their experience as “little boys in a sandbox”. Coaching can facilitate effective communication between leaders and employees from each side of the merger. With a neutral and objective coach, conflict can be resolved with little damage. 

 

Communication 

Communication is one of the most powerful means of steering a merger and acquisition in one direction or another and therefore it carries the highest risk of going wrong. Participants mentioned that communication has often been unrealistic and untruthful. 

Ineffective communication during the merger and acquisition period can lower morale and trust in leadership. It is vital that employees are kept up to date with changes while being inspired to work towards the vision, mission and values of the new organization. Consistent and authentic communication is what drives a culture of trust and encourages employees to stay engaged during the period of transition. 

Coaching can guide leadership when making important announcements and communicating any bad news. With training in effective communication, leaders can be empowered to share the right information and reduce any ambiguity and loss of trust.

 

Culture  

Every interviewee mentioned the aspect of company culture. A merger and acquisition force two different value systems and leadership styles to come together. The more similarities between these two systems and styles the higher the chances of success.  

“M&A is like buying a home, where one moves out, another moves in. Once the money changes hands, we are going to move in together…”. You are essentially asking strangers from too different houses to move in together and keep working as usual. If the culture of these two companies does not match, the long-term success of the merger and acquisition is unlikely. 

Coaches at the early stages can help companies to do their ‘cultural due diligence’ and identify organizations that are a cultural fit, making this a key criteria for moving forward. Companies with a shared culture will improve the overall, long-term performance of the merger and acquisition.  

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How can coaching help?

The study found that integrating a coaching program during a merger and acquisition can add the following value:

Ease emotional strain 

While participants of the study did not receive coaching or mentoring during their merger and acquisition process they felt that it would have benefited them with the emotional strain.

 

“I think there is an enormous role for executive coaching”

 

A coaching program offers a way to improve the lives and mental health of managers and employees during a very uncertain time in their professional lives. The genuine intention and motivation for the well-being of all staff during the merger and acquisition is indispensable in minimizing employee disengagement. 

 

Drive collaboration

The research found that team and group coaching was perceived as an effective means of driving collaboration and culture. 

“…coaching of groups can certainly drive alignment… it is always a team process and therefore it only works in collaboration. Individual coaching can be useful since I am alone and have to endure new situations…. however, group coaching would be more meaningful.” 

 

Coaching gives the organization the opportunity to bring together teams from both sides of the merger and acquisition to bond and collaborate in a positive and open environment. 

 

Enhance leadership competencies

Coaches will help leaders to better motivate staff, facilitate relationship building between leaders from ‘the other’ organization, improve the adaptability of leaders and provide a direction and positive vision for the future.

“…I can only imagine a coach with a deep psychological qualification to support those leaders”

What needs to be considered to make coaching an integral part of the merger and acquisition process? 

Trust

Trust is imperative in moving forward with coaching, which is why all interviewees had reservations about ‘mandated’ coaching. When forced upon executives or senior leaders coaching can be less effective, especially when the acquiring company contracts the coach. In this instance, it was seen as manipulative and was even labeled brainwashing. 

For coaching to be effective it is vital that leadership establishes an environment of trust between employees, management and the coach. 

 

Internal or external coaching

The organizations must decide if they will hire externally or delegate the role internally. 

An external coach is neutral, unbiased and capable of an independent stance. However, they will potentially come at a higher cost and be unfamiliar with the organization, industry, processes and culture.  

An internal coach is familiar with the organization and comes at a lower cost. The risk is that an internal coach comes with a stronger degree of bias and may be perceived as manipulating from the perspective of the coachees. 

 

Coaching methodologies

A consistent approach to coaching during a merger and acquisition can be achieved by establishing a detailed framework. It is vital to decide which is the most effective methodology to use specific to the organization and its culture. Potential methodologies include behavioral cognitive coaching, mindfulness, neuro-linguistic programming and shadow coaching.

The coaching methodology selected is the engine of the program and should be developed by the leaders of both organizations and be facilitated by a professional, experienced coach. 

 

Coaching contract

A clear coaching contract must be defined and agreed on from all sides of the merger and acquisition. Clearly defined metrics will be important to build trust and consistency:

  • What does success mean? 
  • How to measure the fluctuation of staff and/or customers? 
  • How to correlate the results to find the impact financially and on brand acceptance? 
  • What goals are set for the entire duration of the program? 

A clear coaching contract will reduce ambivalence, manage expectations and provide consistency throughout the process. While it may require close contracting between the management and the coach this stage will reduce the ambiguity of coaching and make the process more transparent and tangible.

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In conclusion 

Coaching offers a broad range of methodologies and techniques to support change. This study found that an effective coaching program during a merger and acquisition could be the driver of a successful transition. 

The research shows that if coaching is expected to deliver to its full capacity, it should be introduced early in the strategy development stage and should focus on the human factors of culture, communication and leadership. A culture of trust, clearly defined methodologies and frameworks to follow will be the ‘engine’ of an effective coaching program. 

The findings explore why mergers and acquisitions fail and substantiate the theory that coaching could serve as an effective medium throughout all stages of the merger and acquisition process in the following ways: 

  • Establish a set of values for the merger and acquisition leadership team 
  • Set the bar for ethics for implementing the merger and acquisition successfully
  • Creating an honest flow of communication
  • Holding people accountable to their actions and commitments
  • Establishing strong relationship networks across both organizations 

The evidence from participants in this study suggests that introducing coaching as an integral part of the merger and acquisition process is likely to improve the process and increase the chances of successful outcomes.  

The research begs for a long-term study that populates a sufficient size of mergers and acquisitions where a coaching framework is applied throughout the entire process and compare the findings to mergers and acquisitions that do not use the support of coaching. 

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